The COVID-19 pandemic has seriously damaged the economies of most of the world. After months of lockdown, most people are afraid to go out or are unable to work and this has created frustration and anger.
There are so many so-called “experts” having emerged from the media. There are so many talking heads who are home-bound, locked down and suddenly have become experts.
All those experts have a unified message — do not leave your homes. The so-called experts telling this to folks who are out of work, without food and near starvation must be very frustrating to those who are suffering. The patience is wearing thin and many are rebelling. They want to get out and earn some money so they can feed their families.
A majority of the people in all the nations live on a limited income and most are unable to go out for work is a life-and-death situation for many. The record unemployment and very slow reopening may have a long-lasting damaging impact on the global economies as well as on the U.S. economy.
Therefore, the question is what will happen to the world economies post-pandemic? Will the U.S. be the biggest economy of the globe, as we were four months ago? Which kind of economy will replace the U.S. and the Western economy? In order to answer these questions, let us first take a panoramic view of the types of economies currently dominating the globe.
Political and liberal economies
It has been obvious for a long time that capitalism rules the globe. Communism bit the dust a long time ago. The capitalism system emerged in the 18th century and has dominated the earth for a long time.
This system provides freedom and wealth and brings about stability, tradition and community, and has been immensely attractive. The capitalism has two major forms -- liberal capitalism and political capitalism.
Liberal capitalism is what the EU and the U.S. practice, along with India, Indonesia and Japan. It has many great qualities, including democracy, rule of law that promotes faster economic growth, innovation and social mobility. It concentrates that vast majority of production in the private sector, allowing talents to rise and flourish.
However, one of the major shortcomings of liberal capitalism is that it has created inequality. In the olden days, the people at the top of the income brackets were mostly financiers. Now most of them are highly paid CEOs and managers, web designers, investment bankers and other high-tech professionals. These folks earn billions in salaries annually.
Some of the richest peoples have inherited lots of money or a great deal of their income comes from their financial assets. As a result, the inequality of wealth has become so lopsided that 10% of U.S. individuals possess over 90% of the U.S. wealth.
A few decades ago, the workers unions and the GI Bill helped to tilt the inequality in favor of the common folks, but they are weakening rapidly. A rising share of capital within a small group means they have become much more powerful and have rapidly acquired enormous political power.
Their apparent disinterest during the current pandemic in helping the common people who are most affected suggest their indifference to the pain of the common folks. This upper class is highly educated. Many of them work and their income from their work is massive. Maybe they believe that they deserve their high standing and income.
Most importantly, they invest heavily both in their children and in their political control. These two actions ensure their own and their progeny's control over the government by political influence. They own or control think tanks, universities and many laws, especially the tax laws (low taxes for the rich). The trillions of dollars in bailout money have gone mostly to corporations, bankers and what people received was peanuts — not enough to sustain them or their families for such a long lockdown.
The second system — political capitalism — that is mainly in China (but also practiced in Singapore, Vietnam and many countries in Europe, Asia and Africa) is a different type of capitalism. The political capitalism is run by technocrats and owes legitimacy to economic growth. This constant economic growth provides the legitimacy to the state.
Since the end of the Cold War, China’s growth rate has averaged 8% compared to about 2% in the U.S. The huge growth rate in political capitalism is not limited to China but both Vietnam and Singapore also have significant growth rates. Of note, in 1978 almost 100% of China’s economic output came from the public sector, but currently, less than 20% is coming from the public sector and over 80% are in private hands, like what we observe in the West.
At the time of this writing over 100,000 U.S. citizens have died. While, in China during the last few days there has been no new COVID-19 infection. China appears to have the contagion under control. In the U.S. it is still climaxing in many regions.
I will leave it up to readers to figure out what will happen next. We have lost our economy big time. The Federal Reserve Bank of Atlanta's forecasting model predicts the U.S. economy shrinking 42.8% from April through June. That's 42.8%!
As for the jobs market, Federal Reserve chief Jerome Powell said the U.S. unemployment rate could peak at 25%. In April, the unemployment rate hit 14.7% from 3.5% — the highest since the Great Depression. Forty million Americans have filed for unemployment and the real jobless rate is 24%. The great news is that we are still to be the greatest superpower for years to come, economically and the size of fire power we have.
Political capitalism thrives on globalization. Our rich elites have moved the U.S. industries to China, Vietnam and other places so they can be richer. We need to bring our industries back home.
After World War II, the U.S. had the most booming economy, but greed prompted the rich elites to make more money and now our jobs have gone far, far away. The U.S. South, which grew some of the best cotton on earth, thrived on textiles. We still grow lots of cotton in the South but send it to China. Bring our industries back home. This is one of the solutions.
This summer I wanted to grow my own ginger root and needed fresh ginger to plant. I found out that most of our ginger root comes from China. Eventually, I did find locally grown ginger root.
What kinds of recovery?
The experts do not know yet about the kinds of recovery we will have. Are we going to recover quickly or slowly? The brightest scenario is that it will be a V-shaped recovery, meaning the economy has dived down deep and will re-emerge like an expert deep-sea diver.
Most of the economists believe it will be a slow recovery like a U-shape. The worst scenario is L-shape. Meaning, it may not be what we had on New Year’s Eve in 2020 — a booming stock market with the lowest unemployment ever!
However, there are many positive results that may come out of this grim situation. As a great nation, we can fix many of the things that have been broken with our economy. We could finally tackle growing income inequality, authorize student loan debt relief, restrain soaring health care costs, incentivize more climate-friendly business activities and better prepare for the next pandemic so everyone can have plenty of reusable masks, PPE and ventilators. And be ready to test 300 million Americans against whatever disease hits us!
Since I wrote the last op-ed piece more than a month ago, there are several questions readers have sent me and so here, I pick just a couple of the most pertinent and will try to answer them.
Questions from readers
Can a person who has recovered from COVID-19 be re-infected again?
The science dictates that once a person has recovered from COVID-19, he or she has developed immunity to that virus, and it is very unlikely that this individual will be re-infected with the very same virus. The example will be like if you are infected with a navel orange (being COVID-19) you cannot be infected with the same virus, unless it drastically changes its genetic makeup. Influenza does that every year, but it is extremely unlikely that coronavirus can do this.
Why do individuals who have recovered from the virus test positive for COVID-19 again?
The individuals infected with COVID-19 (example navel orange) and have recovered have developed a strong immunity against the virus. This immunity in the form of antibodies is powerful, and usually emerges 5-10 days after infection. These antibodies essentially attack the virus and cut the virus into pieces. Like when we squeeze the juice out of the navel oranges.
But the orange-peels linger around for weeks and perhaps for months in some folks. We call these peels antigens. The COVID-19 tests detect the peels (antigens), therefore one can test false-positive even he is recovered.
One of the main reasons is that the COVID-19 infection grossly harms many organs in some seriously ill patients and especially the human spleen and liver. The spleen is one of the organs that filters out blood and removes the antigens (the orange peels). It can be severely damaged during the infection in some patients.
Do not lose hope
There are over 160 drugs being evaluated and over 100 laboratories are working on vaccines. Things will become normal — at least a new normal -- soon. Meanwhile, keep practicing social distancing, wear masks, stay away from crowded places and wash your hands frequently.
Try to find positive aspects of the lockdown. We are what we are exposed to in our early lives. Try to expand your knowledge about other cultures, religions and ideas. Trust in “God the Supreme” and be patient. Like all great disruptions, this will pass.
Dr. Omar Bagasra, M.D., Ph.D., serves as professor of biology and the director of the South Carolina Center for Biotechnology at Claflin University.
Concerned about COVID-19?
Sign up now to get the most recent coronavirus headlines and other important local and national news sent to your email inbox daily.